Colleges face reality of financial aid

Recognizing that postsecondary educational institutions have a vested interest in helping students keep their debt as low as possible, financial aid officers at local colleges and universities are stepping up their game.

“We can’t ignore the fact that the economic turmoil is having an impact on people’s plans to finance college,” said Tom Ball, director of financial aid at Grove City College, where 69 percent of the 2,500 students are receiving some type of financial assistance, either in the form of gift aid from the college or loans. “We’re seeing that the need for help is increasing in our financial aid applications, but the expected family contribution is remaining the same or declining slightly.”

Financial aid officers are implementing initiatives to offset the effects of unmanageable student debt, which can include a decrease in enrollment and retention, an increase in loan default rates, the loss of institutional eligibility for funding and the inability of graduates to support their alma mater in the future. Initiatives include increasing fundraising efforts, seeking new sources of revenue, offering tuition payment plans and providing educational programs on debt management and financial literacy.

Grove City is in the midst of a capital campaign aimed at raising $30 million to increase the amount of gift aid, or scholarships, it can provide. About $18 million has been raised in the campaign, which is expected to be completed in 2015. Ball said the college typically disburses about $5.5 million per year just in gift aid, not counting grants, loans and other assistance.

Fundraising initiatives to fill the gap between what families are able to pay for a college education and the amount of available state and federal funding are noteworthy in light of recent reports from the College Board, a New York City-based nonprofit organization that promotes equity in education. The College Board estimates that total education borrowing, including federal and nonfederal loans, among U.S. students and their parents in 2011-12 was $113.4 billion, 24 percent higher than five years earlier.

“We’re raising money to offer more scholarships so, hopefully, students will take out fewer loans,” Ball said.

According to the College Board’s Trends in Student Aid 2012 report, about 57 percent of public college students borrowed an average of $23,800 by the time they graduated in 2010-11, while those in private institutions accumulated an average of $29,900 in debt.

Jill Fernandes, director of financial aid at California University of Pennsylvania, said universities suffer consequences when students are overburdened by debt.

“Universities see a decrease in enrollment and retention, and they experience increased receivables and loan default rate increases, which can lead to heightened disbursement regulations being imposed or the loss of federal financial aid funding eligibility,” she said. “A university also may lose the opportunity to remain connected with its graduates, which can impact the university’s brand image and ultimately its enrollment. A strong base of satisfied alumni can be a powerful tool for recruiting new students. Conversely, unhappy alumni are less likely to recommend their alma mater or remain engaged as alumni.”

Of the 6,681 undergraduates enrolled at California University this fall, about 85 percent receive financial aid. The university has revamped its process of awarding institutional scholarships, reorganized various financial aid and accounting offices to promote timely billing and receipt of payments from outside sources, and implemented a financial literacy program.

Robert Morris University is using a debt management program to educate students about the impact of loans before they graduate. Families also are urged to participate in a monthly tuition payment plan instead of borrowing money in order to keep their loan debt at a minimum.

Of the 4,200 undergraduate students enrolled at RMU, 3,900 are receiving some form of financial aid. Like most universities, RMU provides scholarships based on academic merit, financial need and athletic performance. The university’s website also features an extensive list of outside scholarships that may benefit students.

“Our students depend on grants and scholarships. When state agencies cut their funding for grants, that adds a burden for our students to find money to make up the difference,” said Stephanie Hendershot, director of financial aid at RMU. “Until the economy improves and parents and students are able to start saving for college again, student debt will always be a concern.”

Patty Hladio, director of financial aid at Slippery Rock University, doubts federal and state grant funding will be sufficient to keep up with students’ needs in the coming years. Therefore, she believes the burden for raising financial aid dollars will continue to fall on colleges and universities.

“What I’ve seen in these economic times is that federal and state budgets are tightening and there are less needs-based grants available,” she said. “As a result, students are turning to loans for help.”

Slippery Rock is working to identify possible funding that could be used to fill the financial voids for 85 percent of the 7,860 undergraduates who receive assistance. The university’s needs-based scholarship program will help about 600 students in the 2012-13 academic year. The SRU Foundation also is working with donors to raise scholarship funds.

Hladio said students who are unable to secure enough funding for education are at risk of leaving school rather than graduating. She noted that Slippery Rock is fortunate to be located in close proximity to five community colleges for students who must choose a less expensive option. Articulation agreements are in place with the community colleges for students who select this route and then return to Slippery Rock to complete their education.

More than 5,900 undergraduates started their education at Duquesne University this fall, making it the largest incoming class in the institution’s history. Of that number, 96 percent are receiving financial help of some kind.

“We try to help students find the best financial aid package and help them understand that loan funding should be a last resort,” said Rich Esposito, director of financial aid at Duquesne. “We review our scholarships and our awarding strategy every year. We also advise students to research outside scholarships from clubs and organizations.”

Duquesne’s efforts are paying off, with a retention rate of more than 88 percent compared to the national average of 75 percent for private, nonprofit institutions.

“Retaining students through the point of graduation is the goal of colleges and universities across the nation,” said Linda Anderson, director of financial aid at Carnegie Mellon University. “We have seen increasing retention rates at Carnegie Mellon over the last decade. In addition, strong earnings aid Carnegie Mellon graduates in managing their student debt after graduation and keeps our loan default rate very low even during the economic downturn.”

The average dollar amount of student loan balance per student who graduated from CMU between 2007 and 2011 was $30,685, according to Anderson. Of the 6,203 undergraduates enrolled this fall, more than 66 percent receive financial aid.

SmartMoney magazine reported in September that the median salary among students who graduated from CMU within the past three years is $59,800.

“Studies show that job prospects and lifetime earnings are much improved by earning a degree from a high-quality research university and students are willing to borrow to pay for that quality and improved earnings potential,” said Marc Harding, chief enrollment officer at the University of Pittsburgh. “Without completing their education, students may decrease their earnings potential and there may be an increased possibility of defaulting on their loans.”

“The University of Pittsburgh will continue to investigate and explore new initiatives to assist students who may not be able to cover their educational expenses,” Harding said. “One of the new focus areas for the new director of financial aid will be financial literacy and outreach.”